12 July 2024, EUR/USD
Event to watch out for today:
15:30 GMT+3. USD - Producer Price Index
17:00 GMT+3. USD - Consumer Sentiment Index from the University of Michigan
EURUSD:
The Euro-dollar pair tested a fresh five-week high on Thursday, helped by a broad market sell-off in the US dollar after US consumer price index (CPI) inflation data softened to the slowest rate of price growth since late 2021. Growing market hopes for an acceleration in the pace of rate cuts have kept market sentiment high ahead of Friday's trading session. However, an expected rise in the US wholesale producer price index (PPI) could spoil the bullish mood. European data on Thursday did little to energize Euro traders: the final consumer price index (HICP) in Germany came in at 2.5% y/y, as expected.
US CPI inflation came in below expectations in June. Annualized core CPI inflation fell to 3.0% y/y from the previous reading of 3.3%, beating the forecast of 3.1%. In addition, June CPI inflation fell -0.1% m/m from 0.0% in the previous month and below expectations of 0.1%.
In the week ending July 5, U.S. initial jobless claims fell to 222k from a revised 239k in the previous week and above the forecasted 236k. This decline in jobless claims brought the four-week average down to 233.5k from the previous 238.75k.
With US CPI inflation slowing rapidly, market expectations of a rate hike by the Federal Reserve (Fed) now point to the possibility of three quarter-point rate cuts in 2024. CME's FedWatch tool shows a 95 percent increase in the probability of a rate cut in September.
With the release of US CPI data this week, all that remains is Friday's Producer Price Index (PPI) wholesale inflation, which could disrupt the plans of those hoping for a rate cut. The core PPI for the year ending in June is expected to rise to 2.5% from a previous reading of 2.3% due to businesses facing higher cost pressures than the Fed would like.
Trading recommendation: Trade mainly with buy orders at the price level of 1.0875. Consider sell orders at the price level of 1.0845.
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